December 29th, 2016 5:06 AM by Jackie Graves, President
Check out these tips on ways to reduce your down payment,
get a loan with imperfect credit, save by refinancing and put yourself into a
good financial position to pay off your loan.
You can make a small down payment — or none at all
don’t always have to make down payments of at least 20 percent. In fact, some
loan programs allow qualified people to buy homes with no down payment at all.
Department of Veterans Affairs guarantees zero-down VA mortgages for qualified
borrowers: veterans, active-duty service members and certain members of the
National Guard and Reserves. Some surviving spouses of veterans are eligible,
Department of Agriculture guarantees zero-down mortgages as part of its Rural
Development program. The loan guarantees are available in mostly rural areas,
though some are suburban.
Credit Union offers zero-down mortgages for qualified members to buy primary
Housing Administration-insured mortgages allow down payments as small as 3.5
percent. And a few lenders offer conventional mortgages with down payments of
as little as 3 percent with private mortgage insurance.
With FHA, you can get a loan with imperfect credit
loans are appealing because they’re widely available to borrowers with
imperfect credit. You need a credit score of 580 or higher to get an
FHA-insured mortgage with a down payment as low as 3.5 percent. If your credit
score is between 500 and 579, you need to make a down payment of at least 10
percent to get an FHA mortgage.
Keep some savings in reserve
lenders don’t want you to deplete your savings on the down payment and closing
costs. They want you to have “reserves” — cash, or assets that can be sold
quickly, so you can take care of unexpected expenses without missing house
payments. Your lender will calculate the minimum reserves you’ll need to
qualify for a mortgage.
You can save by refinancing into a 15-year loan
into a 15-year mortgage saves money in two ways: 15-year mortgages tend to have
lower interest rates than 30-year loans, and you pay interest over a shorter
period. In most cases, the monthly payments on a new 15-year mortgage are
higher than for a 30-year loan, but the total interest paid over the life of
the loan is less.
Borrow what you can afford to repay
your means. A conservative rule of thumb is that all of your monthly debt
obligations shouldn’t exceed 36 percent of your income before taxes. If you
have a high credit score and will have plenty of money in the bank after you
close on the loan, the lender will be willing to let you accept a higher house
Ask about a no-closing-cost mortgage
mortgage has thousands of dollars in mortgage fees and other closing costs. If
you pay those fees out of pocket, you tend to get the lowest interest rate
you’re eligible for. But you might want to accept a higher interest rate in
exchange for the lender paying some or all of the closing costs.
speaking, no-closing-cost mortgages are attractive to people who plan to sell
their homes within five years or so. If you plan to stay longer than five or
six years, your total costs will be lower if you go ahead and pay the closing
costs out of pocket.
cash-out refi might work for you
refinance happens when the homeowner refinances the mortgage for more than the
amount owed. The borrower pockets the difference.
The other way
to extract cash from equity is through a home-equity loan or line of credit.
When you want to spend the money on something short-term, it’s probably better
to get the money through a home-equity loan or line of credit. But if the
purpose of the money is long-term, then a cash-out refi might make more sense.
You might be able to refinance into a VA loan
eligible for a VA-guaranteed mortgage, you might be able to refinance from a
conventional mortgage (or an FHA-insured mortgage) into a VA loan. In many
cases, you can refinance for up to 100 percent of the home’s current value.
This means you can do a cash-out refinance using a VA loan.
Be patient during underwriting
up your credit cards and don’t apply for new credit while the mortgage is going
through the underwriting process.
apply for the mortgage, the lender looks at your credit report and your credit
score. Then, shortly before closing, the lender surveys your credit again. If
there’s a substantial change, the lender might have to delay your mortgage
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